Easton could adopt commuter tax by end of July

Money from the increase would boost three of the city's distressed pension funds.

June 13, 2012|By JD Malone, Of The Morning Call

Easton officials hope to get their first look at a proposed commuter tax hike later this month.

Officials believe the tax is the best way to counter a $1.84 million rise in required contributions to several of the city's distressed pension funds. The legislation would levy an additional 0.75 percent earned income tax on the 10,500 or so people who work in the city but live elsewhere.

The tax bump would be expected to generate $1.35 million a year — not enough to offset the total rise in pension contributions.

The commuter tax will be introduced at the City Council meeting on June 27, and might be voted on July 25. At Tuesday's Finance Committee meeting a public hearing was set for July 16.

Attorney John Nixon, who wrote the tax ordinance for the city, said Tuesday that there is an appeal process after the adoption of such a tax, but any appeal must be rooted in law.

"It can't just be, 'I don't like the tax,'" Nixon said, "but be based on a deficiency of the tax."

New revenue collected by the tax could only be used for contributions to three of the city's four pension funds that are classified as distressed. The 1 percent earned income tax now paid by nonresidents will still be funneled to the city's general fund.

Councilwoman Elinor Warner said Tuesday that she didn't like the idea that only employees will see the tax hike.

"The people who own the company don't get the increase," Warner said. "Just the workers."

City Finance Director Chris Heagele agreed that the tax could be seen as unfair because it would not touch owners' profits, but said the commuter tax is a mechanism of state law, and the law targets only employees.

Rose Herr, a vice president for Keystone Collections Group, said the company and city would send out letters in October and November to explain the tax changes to those affected. According to city and Keystone estimates, 10,599 people work in the city and live elsewhere, including almost 2,500 who live out of state. Lafayette College students working part-time jobs make up a large portion of the out-of-state worker population.

Officials said the average employee would pay an extra $127.18 a year.